What a rally we had yesterday in the $SPY, topped by the small caps ($IWM), which brought the bulls back to the tape. When the Russel 2000 is shooting its first bull flag and the S&P 500 is acting in this manner risk can be put back on. However after yesterday’s rally I trimmed profits for cash flow and left about one third of my stocks for today’s continuation.
Today we want the $SPY to go over $443.80 and through $445.37, for a short term cup-and-handle. If this happens I will get more bullish in my attitude. The dips were buyable yesterday, but the fact that the ETF did not close above the 21 day EMA did not give me the full confidence to stay more invested overnight.
When the market tumbled on Monday the small caps went down through all the moving averages like a knife through butter. This was a big signal to have risk off and to buy puts. Yesterday it was turn-around Thursday in the $IWM as it posted an igniting candle. This shows the robustness of the market and it gives you incentive to have risk put on. Will we have continuation today or digestion? You want the $IWM to stay above $222.25 and preferably keep half of its yesterday’s candle, at around $223.
Ford showed amazing strength yesterday for a cyclical, and it pushed out of the downward trend from Monday, and came back to last Friday’s scenario. It is above all the moving averages and now it should follow the bullish scenario, in which it goes above $14.05. I bought this stock at the beginning of yesterday’s tape, and trimmed a quarter at $13.70.
This giant completely tumbled down under all the moving averages in Monday’s blood bath, but it made a slow and steady recovery above the 8 day yesterday. It shot up above the 21 day but it lacked in power towards the end of this tape. After the FED talk I bought a call option $3420, and in yesterday’s rally I sold the $3450, to protect my gains. It cost me $500 with a possibility to gain a maximum of $3000. This stock is difficult to trade, and therefore I resorted to this method. The risk is defined and at the same time it keeps you involved in case Amazon has a strong end to the week.
This week has been like a fun fair ride, and we are close to its end. If you traded using technical analysis your pain should have been medium on Monday, a bearish attitude on Monday to Tuesday should have made you some cash flow, and the positive FED news along with technical analysis should have made you all your losses back and then some yesterday. Keep positive, respect the trend and know that technical analysis always keeps your head clear.
Have an amazing weekend and prepare your plan for next week. You’ll get our Weekly Digest tomorrow in order to see our own take of what happened in this tape and what we can do better next.
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